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Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes In accordance with the guidance pursuant to accounting for income taxes, a deferred tax asset or liability is determined based on the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. The Company provides a valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax asset will be realized. The components of the provision for income taxes are presented in the following table:
| Year Ended December 31,
| 2017 |  | 2016 |  | 2015
Current: |  |  |  |  |
Federal | $ | — |  |  | $ | — |  |  | $ | — |
State | — |  |  | — |  |  | — |
| — |  |  | — |  |  | — |
Deferred: |  |  |  |  |
Federal | — |  |  | — |  |  | (1,594,000 | )
State | — |  |  | — |  |  | (504,000 | )
| — |  |  | — |  |  | (2,098,000 | )
| $ | — |  |  | $ | — |  |  | $ | (2,098,000 | )
The reconciliation of income taxes attributable to continuing operations computed at the statutory tax rates to income tax expense (recovery), using a 35% statutory tax rate, is as follows:
| Year Ended December 31,
| 2017 |  | 2016 |  | 2015
Income (benefit) taxes at statutory rates | $ | (30,872,000 | ) |  | $ | (25,809,000 | ) |  | $ | (10,920,000 | )
State income tax, net of federal benefit | (4,000 | ) |  | (4,000 | ) |  | (2,640,000 | )
Change in valuation allowance | (20,965,000 | ) |  | 29,678,000 |  |  | 7,882,000 |
Research and development tax credits | (3,456,000 | ) |  | (3,117,000 | ) |  | (1,537,000 | )
Fair value warrant | (282,000 | ) |  | (47,000 | ) |  | (253,000 | )
Stock compensation | 2,332,000 |  |  | 113,000 |  |  | 2,288,000 |
Uncertain tax positions | 846,000 |  |  | 1,367,000 |  |  | 1,968,000 |
Expired NOLs and credits | 454,000 |  |  | 4,269,000 |  |  | 339,000 |
Limited NOLs and credits | (165,000 | ) |  | (6,456,000 | ) |  | (297,000 | )
Change in state tax rate | 50,019,000 |  |  | (495,000 | ) |  | 676,000 |
Other | 2,093,000 |  |  | 501,000 |  |  | 396,000 |
| $ | — |  |  | $ | — |  |  | $ | (2,098,000 | )
The income tax benefit recorded during the year ended December 31, 2015 of $2.1 million is principally due to a requirement under Accounting Standards Codification ("ASC") 740, Accounting for Income Taxes, that a Company must consider all sources of income in order to determine the tax benefit resulting from a loss from continuing operations. As a result of the requirement under ASC 740-20-45-7, the pretax income which the Company generated from other comprehensive income was a source of income which resulted in the partial realization of the current year loss from continuing operations. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2017 and 2016 are shown below:
| As of December 31,
| 2017 |  | 2016
Deferred tax assets: |  |  |
Capitalized research expense | 8,546,000 |  |  | $ | 567,000 |
Net operating loss carryforwards | 71,665,000 |  |  | 95,500,000 |
Research and development and other tax credits | 7,531,000 |  |  | 5,300,000 |
Deferred revenue | 297,000 |  |  | 5,452,000 |
Deferred rent | 2,097,000 |  |  | 2,231,000 |
Stock-based compensation | 3,091,000 |  |  | 4,511,000 |
Acquired intangibles | 858,000 |  |  | 989,000 |
Other | 1,906,000 |  |  | 3,783,000 |
| 95,991,000 |  |  | 118,333,000 |
Valuation allowance | (94,039,000 | ) |  | (113,407,000 | )
Total deferred tax assets | 1,952,000 |  |  | 4,926,000 |
Deferred tax liabilities: |  |  |
Acquired intangibles | (124,000 | ) |  | (175,000 | )
Investment in affiliated entity | (422,000 | ) |  | (3,624,000 | )
Fixed assets | (1,430,000 | ) |  | (1,302,000 | )
Net deferred tax liabilities | $ | (24,000 | ) |  | $ | (175,000 | )
As of December 31, 2017, the Company had federal, California and Pennsylvania tax net operating loss carry forwards of approximately $298.9 million, $68.6 million and $75.6 million, respectively, net of the net operating losses that will expire due to IRC Section 382 limitations. The federal, California and Pennsylvania net operating loss carry forwards will begin to expire in 2018, 2028 and 2021, respectively, unless previously utilized. The Company adopted ASU 2016-09 in the first quarter of 2017. Under the new guidance, companies will no longer record excess tax benefits and certain tax deficiencies related to share-based payment to employees in additional paid-in capital. Instead, the Company will recognize all income tax effects of awards in its income statement when awards vest or are settled. All excess tax benefits not previously recognized were to be recorded to retained earnings as a cumulative effect adjustment upon adoption. Upon adoption, no adjustment to retained earnings was necessary due to the Company's valuation allowance position. Approximately $1.1 million attributable to excess tax benefits on stock compensation that had not been previously recognized was added to the deferred tax asset for NOLs with a corresponding increase to the valuation allowance. In addition, the Company had federal and state research tax credit carryforwards of approximately $11.1 million and $2.1 million, respectively. The federal tax credit carryforwards will begin to expire in 2018. The California research tax credits do not expire. Utilization of the NOL and tax credit carryforwards is subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986, and similar state provisions due to ownership change limitations that have occurred previously or that could occur in the future. These ownership changes will limit the amount of NOL and tax credit carryforwards and other deferred tax assets that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382, results from transactions increasing ownership of certain stock holders or public groups in the stock of the corporation by more than 50 percentage points over a three-year period. The Company and VGX both experienced ownership changes under Section 382 as a result of their 2009 merger. The ownership change resulted in annual limitations on the utilizations of tax attributes, including net operating loss carryforwards and tax credits. The Company estimates that approximately $13.4 million of tax benefits related to NOL and tax credit carryforwards will expire unused. Accordingly, the related NOL and R&D credit carryforwards have been removed from deferred tax assets accompanied by a corresponding reduction of the valuation allowance. Due to the existence of the valuation allowance, limitations created by current and future ownership changes, if any, related to the Company's operations in the United States will not impact its effective tax rate. Any additional ownership changes, may further limit the ability to use the net operating losses and credits carryovers. The Tax Cuts and Jobs Act ("the Act") was enacted on December 22, 2017. The Act includes a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. federal corporate tax rate from a maximum of 35% to a flat 21%, effective January 1, 2018. In conjunction with the tax law changes, the SEC staff issued Staff Accounting Bulletin 118 ("SAB 118") to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. In these instances, a Company can record provisional amounts in its financial statements for the income tax effects for which a reasonable estimate can be determined. For items for which a reasonable estimate cannot be determined, a company should continue to apply ASC 740 based on the provisions of the tax laws that were in effect immediately prior to the Act being enacted. As a result of the new law, the Company has revalued its deferred tax assets, which represent a reduction in the amount of corporate taxes that are expected to be paid in the future, by $50.0 million. The Company has also reduced its valuation allowance by $(50.2) million for a net impact of $(0.2) million as a result of the Act. This impact is considered to be a provisional amount as the Company is still analyzing certain aspects of the Act and refining our calculations. The ultimate impact may differ from this provisional amount, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Act. In addition, as there is some uncertainty around the grandfathering provisions related to performance-based executive compensation, the Company has not estimated a provisional amount for deferred tax assets related to performance-based executive compensation and continue to apply ASC 740 based on the provisions of the tax laws that were in effect immediately prior to the Act being enacted. Upon the issuance of additional guidance by the U.S. Treasury Department and other standard-setting bodies, the Company plans to adjust its deferred tax assets accordingly. The following table summarizes the activity related to the Company's unrecognized tax benefits:
| Year ended December 31,
| 2017 |  | 2016 |  | 2015
Balance at beginning of the year | $ | 6,855,000 |  |  | $ | 5,455,000 |  |  | $ | 2,759,000 |
Increases related to current year tax positions | 1,532,000 |  |  | 1,183,000 |  |  | 615,000 |
Increases (decreases) related to prior year tax positions | (74,000 | ) |  | 217,000 |  |  | 2,081,000 |
Balance at end of the year | $ | 8,313,000 |  |  | $ | 6,855,000 |  |  | $ | 5,455,000 |
The amount of unrecognized tax benefit that, if recognized and realized, would affect the effective tax rate was $7.1 million as of December 31, 2017. The Company has not recorded any interest and penalties on the unrecognized tax positions as the Company has continued to generate net operating losses after accounting for the unrecognized tax benefits. The Company does not anticipate that the total amount of unrecognized tax benefits will significantly increase or decrease within twelve months of the reporting date. The Company and its subsidiaries are subject to United States federal income tax as well as income tax in multiple state jurisdictions. With few exceptions, the Company is no longer subject to United States federal income tax examinations for years before 2014 and state and local income tax examinations before 2013. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses were generated and carried forward, and make adjustments up to the amount of the net operating loss carryforward amount. The Company is not currently under Internal Revenue Service (“IRS”), state or local tax examination.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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